Shown with special permission from Oklahoma City Abstract & Title Co.

Why Do I Need An Abstract?

By James B. Dixon
The President and General Counsel of
The Oklahoma City Anstract & Title Co.

"Why do I need an abstract?" seems to be a frequently asked question by everyone involved in the real estate industry. The frequent response, though very true and correct, of "because the law says so," does not really explain the depth of the problem.

An abstract is a full and complete record of all matters filed of public record that affect title to a particular piece of real property. It is certified by a licensed and bonded abstractor to a particular date. The somewhat misleading part of the use of an abstract is that not all companies that close loans or issue title insurance policies are abstractors. An abstract company is one that has been approved by the State of Oklahoma office of the State Auditor and Inspector and is regulated and bonded, with a complete title plant of the county records maintained by said abstract company.

When issuing title insurance, all companies that do so are regulated by the State of Oklahoma Insurance Commissioner's office. Thus, when an abstract company prepares an abstract, it does so under another regulatory body of the state. However, all companies that do issue policies of title insurance must abide by the laws of Oklahoma in doing so. The applicable law on this matter is found in Oklahoma Statutes, Title 36, Section 5001. Under this section, a policy of title insurance can only be issued by a licensed abstractor or an attorney licensed to practice in Oklahoma and duly appointed as an agent by a title insurance company. Further, no policy may be issued except after an examination of a certified abstract of title by a licensed Oklahoma attorney.

This being the clearly written law, what then is the problem? The turmoil in this area has been created by various companies and individuals (known in the title industry as "independents") who are operating title service businesses by doing their own searches of the county records and writing title policies from said searches. In the past, they have been able to undercut the regulated title companies in cost because they had no plant to maintain nor the considerable overhead costs related to such daily maintenance. I say "the past" because recent steps by the Insurance Commissioner have made it plain that such issuance of title insurance policies will no longer be tolerated. The Insurance Commissioner has also made clear the position that a uniformity of regulation will now exist for all the industry, and continued violations will be subject to fines, suspensions from business, or complete removal of the title insurance company from operating in this state.

The point of all this is to make the reader aware of the situation. Please monitor closely the nature and kind of company with which you do business. One who approaches you with shortcuts in the area of abstracting is doing you no service. Any violation of the law could seriously affect the title policies that you purchase. Dealing with a reputable abstractor and title insurance company can conclusively offer you the title protection that is vital to all in the real estate industry.